Reverse Mortgage Loan Application Process

The application process for a reverse mortgage loan generally takes about 30-45 days from start to finish and has five major steps. For many, the longest part of the reverse mortgage loan process is the decision-making process that leads up to the application.

The average reverse mortgage applicant begins considering a reverse mortgage months before completing an application. The homeowner researches reverse mortgages using resources such as this site for several months. They next request information from a local reverse mortgage specialist. The homeowner invests one to two months meeting with the specialist in person and reviewing the loan options and other loan documents.

Step 1. Reverse Mortgage Counseling
The first step is to schedule your HUD Counseling session. Once complete you will receive a signed HECM Counseling Certificate. This is proof that the applicant has completed the mandatory counseling session with a HUD-approved counseling agency. The counseling can be completed before or after the initial application in some states but in Utah it is required to be completed before the application.

Step 2. Initial Application
The application legally authorizes the lender to begin the application process but the lender can not incur any costs on your behalf until counseling is completed. The application is not binding and can be canceled at any point during the process. The application will specify the reverse mortgage fees, interest rates, and loan amounts.

Step 3. Appraisal
The appraisal establishes the legal value of the applicant’s property. The reverse mortgage appraisal is a special one — it must be conducted by an FHA-approved appraiser (not all appraisers have this approval) and it must follow a specific FHA format. This means that even if a homeowner has already had an appraisal, it will most likely have to be re-appraised.

Step 4. Underwriting
The lender will confirm the applicant’s legal ownership of the property by conducting a title search and purchasing title insurance. They will also work with the applicant to clear up any issues with trusts, unpaid liens against the title, bankruptcies, etc. Once the lender has finished underwriting, applications that have been approved will be changed to “clear to close” status.

Step 5. Closing
The lender and the applicant set a closing date when a notary or attorney meets with the applicant to sign the final closing documents. This is the applicant’s opportunity to review the closing documents to make sure that the interest rate, fees, and loan amounts are the expected amounts. Once signed, the application goes into a three-day “right of recission” period. This means that even though the closing has taken place, the applicant can still cancel the application with no penalty for three business days after the closing. The rescission period does not apply to HECM for Purchase loans.

Immediately after this waiting period, the title company will issue a check to the homeowner (typically by overnight mail or wire transfer). If the applicant was using a reverse mortgage to pay off an existing mortgage, the title company will also send the mortgage payoff amount to the bank.

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Disclosure:
¹If you qualify and your loan is approved, a HECM Reverse Mortgage must pay off your existing mortgage(s).
With a HECM Reverse Mortgage, no monthly mortgage payment is required. Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). We do not establish an escrow account for disbursements of these payments.
A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must also occupy home as primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable.
The loan becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, or defaults on taxes and insurance payments, or does not comply with loan terms.
A Reverse Mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan).
These materials are not from HUD or FHA and were not approved by HUD or a government agency.
²Social Security benefits estimator available at www.ssa.gov/estimator.
³Loan proceeds are paid tax-free; consult your tax advisor.
Call 1-801-399-2364 to learn more.